Show Me the Money

For the next twenty minutes, Feinberg answered his critics on the board. He has an enormous round head ringed by tufts of brown hair, and a booming Boston brogue that can sound like Ted Kennedy, his former boss and mentor. “You’re only here but for the largesse of the government,” Feinberg reminded the directors. He saw them as tone-deaf and out of touch. Feinberg believed the populist anger over multi-million-dollar payouts at a time when more than 10 percent of Americans were out of work was a force that couldn’t be controlled—essentially, a political fact that would inevitably become a business reality. He let them know that if a deal couldn’t be reached, Congress was prepared to reignite a populist frenzy and he would be powerless to protect them. “I’m trying to meet your goals and the political goals. I’m trying to bridge the gap between public- and private-sector goals,” he told them.

Benmosche faced Feinberg. “This compensation issue is a distraction,” he snapped. “And there’s another thing that’s not helpful I want to show you.” Benmosche flipped on a television built into the wall and played a clip of Geithner appearing on Meet the Press that previous Sunday.

“Would you like [AIG] to be successful?” asked David Gregory.

“I’d like it to be successful enough the taxpayer can get out,” Geithner replied.

“And then after that you don’t care what happens?”

“No.”

After viewing the video, Feinberg left the room, and Benmosche turned to face his board members in private. Benmosche saw himself and his traders as being on the same side as the taxpayers—it infuriated him that Geithner and Congress seemed to see them as the enemy. With Feinberg gone, Benmosche let his anger loose. The pointed exchange he just watched only confirmed in his mind that Feinberg didn’t think he, or his executives, were worth much. He was going to quit. “I’m just about ready to hit the road,” Benmosche said. “Feinberg stabbed me in the back.”

“It wasn’t a moment of anger,” an executive familiar with the exchange later recalled. “It was the last straw of things that were agonizing him.”

Benmosche told the directors he couldn’t lead the company anymore. “When I came in, I promised these people I could stand up for them. What am I going to say to my senior executives when they say ‘I’ve got an offer across the street’? I cannot, in good conscience, tell the guy to hang around. I can’t manage this company with the assignment I’ve been given from Feinberg.”

As the three-hour meeting drew to a close, the board implored Benmosche to stay. He said he would deliver his final answer at the next board meeting, scheduled for November 24. “I’m still stewing about it. I’ll give you my decision then.”

On November 11, The Wall Street Journal reported that Benmosche had threatened to quit. Later that day, he tried to knock down the Journal report in a staff memo stating he remained “totally committed” to running AIG. One board member cautioned that the memo meant little. “This is a highly volatile situation.”

Whether he stays or leaves, Benmosche understood that he had lost control. “It’s Feinberg’s company. That’s what he learned,” one director in the board meeting later told me. “We all thought there was an ability to run this company. We were wrong.”

O n the evening of November 12, Ken Feinberg raced through the revolving doors of the New York Federal Reserve Bank and hopped into the rear seat of his black Suburban. He was late to the opera Don Giovanni. It had been a full day. He’d flown in on the 2:30 p.m. Delta shuttle from Washington, D.C., and stopped by a meeting at 85 Broad Street, Goldman Sachs’ world headquarters, and then spent the rest of the day at the Federal Reserve’s stone fortress at 33 Liberty Street. For the past hour, he’d been in meetings with William Dudley, president of the New York Fed, dealing with the AIG situation. The previous day, the Journal had reported Benmosche’s threats to walk out, and Dudley told Feinberg the Fed was worried about the billions it had invested in AIG. The company had just reported strong third-quarter earnings—FP had reduced the number of trades on its books by 43 percent and made more than $1 billion—but 20,000 trades remained to be unwound and the market was tight. Dudley told Feinberg that if he pressed too hard on compensation, the talent might leave, making everything more difficult.

Feinberg wanted me to know that he’s aware of the stakes of this fight. “We’re very concerned in the special master’s office about making sure the company thrives and pays back the taxpayer. That’s critical. This has nothing to do with retribution at all,” Feinberg told me as we bounced through the streets of lower Manhattan on our way uptown. “There’s absolutely no vindictiveness at all in any of this.”